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Pulse board probes ex-director's share dealings

Thursday 9th September 2010

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NZX-listed electricity retailer Pulse Utilities has frozen trading in 464,000 of its ordinary shares, belonging to a subsidiary controlled by two large shareholders, former director James Martin and Stephen Frewen, pending an independent investigator’s report.

Pulse chief executive Dene Biddlecombe said there could be “loss to shareholders through inappropriate dilution of their own shareholdings.” 

Martin resigned from the Pulse board in March, having given “no satisfactory response” to questions about two million shares made available for issue to a subsidiary, Pulse Utilities Ltd. (PUL), in 2007, to extinguish a potential intellectual property claim against the parent, the company says.

The shares were not to be issued without a deed being signed to renounce any such claim, and any shares not distributed within the six months to March 2008 were supposed to have been cancelled.

"PUL does not appear to have acted in accordance with the agreement,” Biddlecombe said. “In light of the conflicting information provided to date and James Martin’s previous involvements with (Pulse), having an independent adviser investigate this matter, ascertain the facts … and report to the board is considered a prudent and necessary step.”

The announcements come both as Pulse seeks to make an offer of up to $15,000 in new equity to each shareholder, and negotiates a $1 million stand-by bank facility, backed by personal guarantees from “one or more significant shareholders,” to allow it to meet electricity market participation capital adequacy rules more efficiently.

With Pulse showing rapid customer growth in recent months, the company was now keeping a cash deposit of more than $500,000 with the wholesale electricity market clearing manager, NZX.

Pulse hit trouble a fortnight ago when its weekly security payments to NZX were late, and hundreds of millions of dollars in payments to other electricity market participants were frozen over a weekend at considerable cost in overdraft and emergency banking arrangements.

The stand-by facility is a non-cash alternative for which the guarantors are being paid a $60,000 fee.

Shares in Pulse were untraded today at 44 cents.

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